UKRAINE: West draws up plan to stop Putin's energy blackmail

by Peter Westmore

News Weekly, May 24, 2014

The slow-motion crisis in Ukraine as Russia attempts to establish its control over the east of the country has intensified, with the seizure of government buildings, fighting between separatists and Ukrainian government forces, and votes on autonomy in Russian-speaking parts of the country.

Russia has put additional pressure on Kyiv, announcing that Ukraine will now have to pay for its energy up-front, threatening to bankrupt the current government.

Britain, the European Union, Japan and the United States have foreshadowed an emergency response to protect Ukraine and other eastern European countries from cuts in Russian gas exports.

Next month, G7 leaders are expected to sign off on an “emergency response plan” to assist Ukraine next winter if Russia restricts gas supplies.

The G7 refers to the forum of leaders of seven major industrialised countries. It comprises the U.S., Japan, the UK, France, Germany, Italy and Canada. It previously included Russia (the G8), but Russia was excluded after its annexation of Crimea in March this year.

G7 energy ministers have agreed to a plan to eliminate Europe’s reliance on Russian oil and gas over the longer term and prevent energy security being used as a political bargaining chip by Russian President Vladimir Putin.

Russia currently supplies around 30 per cent of all gas consumed within Europe and more than 50 per cent of the gas used by Ukraine. It recently doubled the wholesale price of gas supplied to Ukraine.

In 2006, when the Russian state-controlled energy producer Gazprom turned off supplies through its Ukrainian pipeline, Austria, France, Germany, Hungary, Italy and Poland reported that gas pressure in their pipelines fell by 30 per cent.

Under the G7 proposals, support would be given to build several new liquefied natural gas (LNG) terminals across Europe, while the U.S. would lift restrictions on its exports of shale gas.

At the same time, the EU will invest in new pipelines to move gas from West to East and increase supply routes from North Africa.

Japan is also planning to re-start some of its nuclear plants that were mothballed in the wake of the Fukushima disaster. Japan is now one of the largest importers of LNG, which has pushed up prices to record levels.

Senior UK officials said the ongoing crisis had “concentrated minds”, particularly in Europe, over the energy threat and said there was now a “clear consensus” to take action.

“The diversification of sources and routes for fossil fuels is essential,” the G7 communiqué stated.

“No country should depend totally on one supplier. Nor should energy be used as a means of political coercion or a threat to security.”

Presidential elections in Ukraine are set to take place on May 25. But there is a growing fear amongst top U.S. and EU officials that instability and violence, which they say is backed by Russia, will derail the vote.

“If Russian elements continue to sabotage these elections, then we stand ready to implement more sanctions,” U.S. Secretary of State John Kerry said following talks with the EU’s foreign policy chief Catherine Ashton. “We will not sit idly by while Russian elements fan the flames of instability.”

U.S. officials said they had seen no evidence that a Russian withdrawal had taken place, despite President Putin’s promise to have withdrawn his country’s forces which had massed near the Ukrainian border. Nor has NATO detected any withdrawal of Russian troops.

Furthermore, Russian-speaking separatist groups in eastern Ukraine rejected the Russian president’s call for them to “postpone” their own referenda on independence, and have gone ahead regardless.

Russia’s annexation of Crimea has led to the gradual escalation of tensions in Europe, especially with the occupation of government buildings in eastern Ukraine by armed separatists, who drive around in armoured personnel carriers, carry automatic weapons, wear unmarked military uniforms and balaclavas over their faces, and speak Russian, but claim not to be Russian troops.

However, President Putin recently said that the men who seized Crimea — using exactly the same tactics months ago — were Russian special forces.

Putin’s objective is to force the Ukrainian government in Kyiv to desist from its plan to form an economic relationship with the European Union, and instead revert to a position of dependency on Russia.

The crisis is having a negative effect on Russia’s economy. Foreign capital, needed for major infrastructure projects, has dried up, and Russia’s stock exchange is on the skids.

Tens of billions of dollars have been shifted abroad, with damaging effects on the Russian economy.

Nevertheless, opinion polls in Russia — where pro-government television has portrayed the situation in Ukraine as a fascist coup resulting in the murder of Russians — show that most Russians are strongly supportive of Putin, and most Russians regard Ukraine as part of Russia.